Bad news always comes in threes, as the saying goes.
First there was the Mining Tax, followed by the Carbon Tax. Now, Treasurer Wayne Swan has unleashed the May Budget as the third leg of the trifecta that will damage the Australian resources industry.
Based on the political necessity to produce a budget surplus in 2013, and thus avoid yet another broken promise, the government is dead set on finding any means of conjuring a surplus.
The latest victims are the highly valued diesel fuel rebate (worth $2 billion a year) and the accelerated depreciation and research and development tax breaks (worth another 1.4 billion). Both look set to be axed in the budget.
As the budget deficit pushes out beyond $40 billion this year, it is becoming harder and harder for the Treasurer to find the necessary revenue growth and spending cuts to balance the budget by 2012-13.
The booming mining sector has become an easy target for such remedies but the government is risking damage to the one sector that has ‘saved’ Australia from the ravages of the GFC and will generate massive earnings for the country for the next 20 years or more while China and India emerge as modern economies.
A veritable who’s who of Australian business has been lining up to publicly state their concerns over the two new taxes and the fundamental changes each will impose on Australia’s wealth-creation. The latest is former Commonwealth Bank boss and Future Fund Chairman, David Murray who described the carbon tax as “the worst piece of economic reform I have ever seen in my life in Australia”.
Mr Murray made a very good point that reducing reliance on energy and being more energy efficient would be a more positive way forward. But Mr Swan simply chose to attack Mr Murray’s statements on climate change rather than address his valid suggestions on energy efficiency.
It’s just lucky for Mr Swan that the National Broadband Network has been kept out of the budget calculations.
The mammoth project has already had its near term targets shaved. In 2010 when the original corporate plan was released, NBN Co. said the network would pass 4.2 million premises by June 2015. Now, that target has been diluted to the network being ‘underway or completed’ to 3.5 million premises by the same date.
It is clear the NBN will take much longer to build than originally thought. The question of how many households and businesses will sign up for the network will take even longer to answer. Don’t count on the NBN being profitable any time soon.
